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Defence Sector: Govt clears proposals worth Rs 67,000 crore

ICICIdirect Research 08 Aug 2025 DISCLAIMER

Defence Acquisition Council (DAC) has accorded Acceptance of Necessity (AoN) for nine platforms amounting worth Rs 67000 crore, which includes MALE UAVs (Unmanned Ariel Vehicles), upgradation of key air defence systems, mountain radars, Brahmos launchers, unmanned vessels and maintenance of S-400 and transport aircrafts like C-17 & C-130.
With these approvals, ~Rs 11.2 lakh crore of AoNs have been granted by govt in the last 3.5 years (from April 2022 onwards) as against Rs 8.5 lakh crore of AoNs during FY13-FY22.
Bharat Electronics is likely to be the biggest beneficiary in most of the platforms as a key supplier of electronic systems/sub-systems like radars, electronic warfare. 
In case of MALE UAVs, production is expected to be done by an Indian company in collaboration with a foreign partner. Hindustan Aeronautics (HAL) or Solar Industries can be the key beneficiaries for this platform. HAL can also play a key role in maintenance of the two transport aircrafts.
Astra Microwave is expected to be involved in radars or upgradation of air defence systems while Data Patterns is likely to be the sole supplier of fire control systems for Brahmos missile systems.
Bharat Dynamics is expected to be involved in upgradation of Barak missile system and maintenance of S-400 systems. Midhani can also benefit in supplying critical materials and superalloys for these platforms.
Considering the strong focus on increasing capital outlay for indigenised platforms and reducing procurement timelines of these platforms, we maintain our positive view on the sector. We estimate cumulative domestic procurement opportunity of Rs 7-8 lakh crore over the next 5 years.
However, we remain selective in stocks and recommend Hindustan Aeronautics (target price of Rs 6100), Bharat Electronics (target price of Rs 530), Astra Microwave (target price of Rs 1270), Midhani (target price of Rs 530).

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